City audit brings concerns

February 15, 2013

Work has already begun on an audit of the city of Dunkirk's 2012 budget finances. The audit - and some of its ramifications - were the subject of a lengthy conversation at the meeting of the Common Council Finance Committee.

In reply to a question from First Ward Councilman and committee chair Michael Michalski, City Treasurer Mark Woods said the audit was proceeding "very well." Woods described the auditors use of random sampling to test the processes involved with invoices and vouchers before moving on to the accounts receivable and collection program. He added the auditors began preliminary work in October but have been in City Hall on a regular basis since the beginning of January.

Michalski then brought up the ongoing issue of existing transfers of funds between the city's general, water and sewer funds; something he figured the city would get "dinged on again in the audit."

Article Photos

OBSERVER Photo by Gib SnyderCity Treasurer Mark Woods makes a point during a meeting of the Common Council Finance Committee on Monday. Pictured from left are Stephanie Kiyak, Woods, Stacy Szukala, Fiscal Affairs Officer Richard Halas and Michael Michalski.

Halas and Woods have been tasked by Mayor Anthony J. Dolce to find out the dollar amounts involved, according to Michalski. Halas said he and Woods would start with 2012 and go backwards. Woods added they would probably go back 20 years looking at transfers.

"There are items that have just built and built up over time," Woods stated. "They're old items. They just haven't been addressed, bottom line. Ultimately, it's not going to change the bottom line of the city, it's just these are on the city's ledger and whoever looks at that is going to say 'gee, why do you have this item outstanding?' Why don't you take care of it?'"

Michalski said it was important to determine the amounts and have a plan in place. Talk turned to how repayment might work, but in the end a surplus would be needed in one fund to repay a different fund, an approach Fourth Ward Councilwoman Stacy Szukala took issue with. Szukala said her problem was how the debts accumulated and how to repay it, as Fund I, the general fund, would receive any payments from the water and sewer funds.

"If we take that money and put it back in Fund I we're going to have to raise rates again. ... If it's not affecting our bottom line I see cleaning up the paperwork and forgiving those loans as they are and just let them be," she explained.

Michalski said the outside accountants were advising against that approach.

"How much more are you willing to turn around and raise water and sewer fees?" she asked.

"We can't," Michalski replied.

"We have two struggling industries here right now. Can you imagine what that would do to them the next couple years? You've got to kidding me," Szukala continued.

Michalski said repayment could be spread over 20 to 40 years. Szukala noted the city had just bonded for an additional $4.4 million for water system work with the Lake Front Boulevard seawall fix yet to be addressed.

"So we take what surplus we have out of those two accounts and put it in Fund I, when you have the streets department, parks department, fire and police. Where do you think that money is going to go?" she asked. "I'm just telling you it's a bad idea. I don't see it as working any other way."

Michalski said the city would be getting "dinged" on it until a plan was in place.

"So you'll end up putting everybody at risk again of raising sewer and water and not being able to have industries stay here because they can't afford to produce their product and employ the people that are here and still paying part of the sewer and water?" Szukala asked.

More discussion was held before Woods said the state auditor advised paying the loans back but it was not the only way to handle it.

"I think from an auditor's standpoint that's what they're going to recommend, that we move that cash," he added.

Szukala said such a move could lead to a "huge mess."

"We're going to be raising fees, we're going to be raising taxes, and how many more people do we need to ask to leave," Szukala replied. "It has to stop."

Councilwoman-at-Large Stephanie Kiyak asked if the issue can be forced on the city.

"In their findings, which are very strong recommendations or what they have observed, they will make those recommendations that we need to formulate a plan to eliminate those," Woods replied.

Woods suggested the committee wait to take any action until he and Halas could provide the final numbers involved for each fund.

"There may be some items that realistically should be written off. ... There may be others, you say no, that should be repaid," he added. "And again, it doesn't have to be in one year, three years or anything like that. As long as you're making an attempt to repay it."

The audit on the 2011 budget finances was presented to the city in June 2012.